Description

Urbanimmersive (UI.V; $0.055) is a (tiny) B2B SaaS-like company with some proprietary tech and a GREAT tailwind.

THESIS

Founded in 2007 and based in Montreal, Urbanimmersive provides RE websites, recently including virtual 3D tours. The consensus view is that 100+ companies provide RE websites, making it a hyper-competitive “race to the bottom” in pricing. But, looking under the hood, we think there’s a nice opportunity for Urbanimmersive to carve out a leading position in the low-cost segment of the RE website market due to its low-cost virtual 3D tour.

COMPETITION IN VIRTUAL 3D TOURS

With ~$40 M in sales (and $10-15 M in losses), Matterport is the industry leader in virtual 3D tours. Matterport is viewed as the leader in the industry, but its solution is very expensive. Matterport requires a RE photographer to purchase a ~$5,000 camera, spend 2-3 hours shooting each house (including time to adjust settings and change lenses), plus travel time, plus SaaS fees of $70/month, plus $30-80 in one-time charges, etc. Together, these expenses mean that a RE photographer generally needs to charge the realtor $200-250 for the full website with an embedded virtual 3D tour. Anecdotally, there have been several lawsuits against Matterport due to its aggressive tactics and pricing. Matterport is also on its fourth CEO. Perhaps the #2 player, iGUIDE, has similar costs in hardware, shooting times and ongoing and one-time fees.

While that $200-250 cost makes sense in expensive housing areas like ocean-fronting California, the median price of a house in America is only $227K, per Zillow. With RE commissions falling to as low as 1% and a 50% fee share to the real estate agency, a RE agent may only receive ~$1,100 commission on the sale of a median American home. Do you think most RE agents will spend half of their potential commission on upfront costs like a RE website and preparing/staging? I doubt it.

TAILWIND IN VIRTUAL 3D TOURS

The great tailwind is that virtual 3D tours are becoming the new norm in property markets. The new norm is mostly because cameras with 360-degree lenses or LiDAR have rapidly fallen in price. In short, we are in the age of “democratizing 3D images” due to cheap cameras. With social distancing due to COVID-19, that tailwind is only becoming stronger. As of last year, properties with 3D tours sold 31% faster and at 9% higher prices (per a U.S. survey of 143,000 MLS listings). With 5 M homes sold in the U.S. each year and RE photographers perhaps paying on average $100 per fully-loaded RE website with elements like 3D tours, that’s an addressable market of $500 M (just for U.S. residential).

ENTER URBANIMMERSIVE: WITH A PROPRIETARY VIRTUAL 3D TOUR

There’s arguably ample room for a low-cost solution to compete with Matterport. Over 100 companies provide RE websites, but perhaps only four companies have a robust “3D emulator”. Those include Matterport, Zillow and Urbanimmersive. Urbanimmersive purports to have spent C$10 M on its 3D emulator (though that was primarily 5+ years ago). A 3D emulator enables the creation of a virtual 3D tour that can be embedded in a RE website. Furthermore, it can enable the creation of a floor plan and interactive map (or “dollhouse” per Matterport’s patent).

Unlike Matterport and Zillow, Urbanimmersive’s virtual 3D tour can be downloaded and viewed offline (which may later open up some industrial and government markets). Unlike Zillow, the website can be completely customized to strongly feature the realtor (picture, name, contact info, etc.) and to add a layer of graphics or “hot spots”, instead of Zillow’s strict branding which often strives to hide the realtor and any other content. Urbanimmersive also has various tools like photo-editing (light/color settings and modification) and automatic room naming, though these tools can be copied by others over time.

CATALYST: two new key product launches (3D Pocket Websites and Floor Plans)

Urbanimmersive soft-launched “3D Pocket Websites” (RE website with embedded 3D tour) in mid-February. In August, the company is expected to soft-launch automatically-generated floor plans. You can track daily GMV progress on the company’s website. June was up +15% over last year, and July is tracking to be up +29% over last year. We expect August to show even higher y/y growth due to the pending launch of floor plans.

BUSINESS MODEL

Urbanimmersive currently charges ~$15 for a single property website with 3D tour, plus some add-on fees. Urbanimmersive considers itself a “B2B SaaS” company because it offers ongoing business services (e.g. quoting, invoicing, taxes, scheduling, dashboard with metrics) to RE photography businesses, though currently at no cost. For the TTM, Urbanimmersive’s photography clients created 261,919 RE websites for about 42,400 RE agents. A blended price of $10 ($15 before discounting) times that website figure roughly equates to the company’s TTM sales of $2.6 M, or C$3.5 M.

The go-forward revenue opportunity seems significant. If Urbanimmersive can double its generated websites to ~500K and double its revenue to $20 per website (with virtual 3D tours and floor plans, etc.), that’s $10 M in ARR! We know that B2B SaaS companies with $10+ M in sales and 90+% GM are generally valued at 5-10X sales in the private market, implying a future valuation of at least $50 M if the company executes well.

ACQUISITIONS

In 2018, the company acquired TourBuzz, which had the most North American RE photographer businesses (~2,000) as customers. CEO Ghislain Lemire sees the ~C$5 M spent on the acquisition as marketing spend. The largest North American network of RE photographers – ~2,000 RE photography businesses or ~5,000 individual RE photographers – are now current or former clients.

In February 2020, the company acquired Immersolution, which added several distribution agreements to sell 3D cameras and two employees. The company now has ~15 employees though expects to grow that count as sales grow.  

CATALYST: more partnerships and new features

Urbanimmersive may continue to cobble together some integrations and new features, like Local Logic’s neighborhood information. While any one integration may not move the needle, a combination of these integrations may make the solution compelling, especially based on the low price point.

VALUATION

FY19 (Sept) had sales of C$4.4 M and EBITDA of $725K (16.3% EBITDA margin).

We expect F20 (Sept) sales of C$3.9 M (billing was changed from gross to net billing in March 2019) and EBITDA of C$1 M.

We expect F21 (Sept) sales of C$6 M and EBITDA of C$1.7 M and headcount to grow to 19.

We expect F22 (Sept) sales of C$9 M and EBITDA of C$3.4 M and headcount to grow to 22.

The company has 86 m BS (and significantly out-of-the-money warrants and options) for a Market Cap of C$4.7 M. Senior debt is C$1.4 and a convertible debenture is C$4.5 M. That implies an EV of C$10.6 M.

That means that the company is trading at 6.2X F21E EV/EBITDA and 3.1X F22E EV/EBITDA. At 10X F22E EV/EBITDA, the stock would be at C$0.32, up roughly +500% from here.

If the company achieves sales of C$10 M and is seen as a “growth” stock, then the valuation could exceed C$50 M and approach C$0.50 per share, up +800% from here.

CATALYST: removal of convertible debenture

Insiders own about 19% of shares. The debenture has significantly depressed the stock over the last twelve months, as the company has been issuing shares instead of paying interest in cash. About 40% of the debenture is held by former TourBuzz founders, like Alan Pinstein, who have been selling these shares.

Within twelve months, we expect the company to pay off the convertible debenture, possibly at a significant (>30%) discount.

Catalyst

Two new key product launches (3D Pocket Websites and Floor Plans)

More partnerships and new features

Removal of convertible debenture

F22 (Sept.) valuation looks very cheap based on two years of growth